RFIDs Vertical Buildup Reflects Industry Challenges

 
 
By Jacqueline Emigh  |  Posted 2004-08-26 Email Print this article Print
 
 
 
 
 
 
 

The move toward vertical specialization makes sense, analysts say, since industries such as pharmaceuticals and automobiles each present their own technical implementation issues.

RFID is just about the opposite of a monolithic entity, analysts agree. Although still emerging, the wireless technology already means something very different in the auto industry than in, lets say, pharmaceuticals. As this verticalization syndrome takes greater hold, more partnership opportunities will start unfolding for service companies—but only if they have what it takes. In a report released earlier this week, ABI Research honed in on how large consultancies are starting to pick their shots when it comes to RFID (radio frequency identification) specialization. Accenture, for example, has targeted pharmaceuticals for starters, while Deloitte Touche Tohmatsu is centering around transportation.
Beyond this particular research report, its quite clear that vertical specialization is also a hallmark of the supply chain, a closely associated but older technology discipline. Supply chain verticalization is typically attributed mainly to "business processes."
To make a long story short, you use different business processes if youre building a car than if youre filling a doctors prescription. The materials youre handling are different, and so are manufacturing, distribution, transportation and lots of other processes. But ABI analyst Erik Michielsen told eWEEK.com in an interview that in RFID, differences in business processes are compounded by yet another set of factors: technical implementation issues that can vary markedly from one industry to the next. Click here to read about a $65 million e-pharmacy that uses RFID.
Other analysts tend to concur. Also this week, two analyst organizations–The Meta Group and IHL Consulting Group–each released reports suggesting that RFID is taking off much faster in the pharmaceutical field than in consumer goods. In another interview, IHL president and founder Greg Buzek drew further distinctions between types of consumer goods: packaged foods, fresh foods, HBAs (health and beauty aids) and clothing, to name a few. "I dont see item-level tagging on the food side as happening for years, if ever," Buzek said. "The tags will be too easily defeated by [distortion of RF waves] from liquid condensation or metal." Read more here about the technical and practical difficulties retailers face in trying to implement self-service checkout systems. In comparison, item-level tagging might give high-end clothing stores some real ROI (return on investment). "If youre paying 20 cents per tag, you wont get much of a payback out of attaching a tag to a Schick razor," Buzek said. "But if you attach a tag to a $500 black, size 8 dress, and you cant find the dress, youll be able to immediately know that it was left in the dressing room, or it got hung on the wrong rack," he said. Indeed, some high-end design shops such as Prada are already implementing item-level RFID tagging. Bruce Hudson, an analyst at META, mentioned a couple of other consultancies that, like Accenture, are pursuing the pharmaceuticals space: Capgemini and Acsis, a vendor that sells both products and services into pharmaceuticals and several other verticals. As further evidence of verticalization, Hudson pointed out that manufacturers in the auto industry are starting to use RFID for tagging not only the engine, but each and every auto part. Many supply chain consultants, in fact, are starting to leverage vertical-specific knowledge already gained on the supply chain side as they migrate across to RFID, ABIs Michielsen said. More retailers are considering RFID mandates. Click here to read more. As examples, Michielsen cited IGS, Computer Sciences Corp. and Northrop Grumman, all of which have done a considerable amount of supply chain consulting for the U.S. Department of Defense. "The more comfortable you are within those vertical silos, the better positioned you are," Michielsen said, adding that after figuring out how to climb a vertical silo, a service firm often spreads out into related silos. Is there room in RFID for smaller consultants, too? While analysts said yes, they added that smaller companies also must be able to offer customers a needed mix of RFID skill sets and "domain knowledge" about processes, cultures and players within specific verticals. Xterprise is one example of a smaller startup thats successfully making the jump into RFID. Right now, Xterprise is drawing on its consumer goods supply chain background in helping several consumer goods distributors to comply with Wal-Marts RFID mandate. Xterprise CEO Dean Frew said he takes issue with some analysts perception that RFID is getting a faster start in pharmaceuticals than in consumer goods. But Frew is indeed convinced that RFID verticalization is under way. "RFID is more than just a tool that sits on your toolbelt," Frew told eWEEK.com. "RFID is all about the context in which its being delivered." Check out eWEEK.coms Supply Chain Management & Logistics Center for the latest news and analysis of enterprise supply chains.
 
 
 
 
 
 
 
 
 
 
 

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